While IBM was yesterday trumpeting the fact it has exceeded its state contractual obligation to hire at least 800 workers at its Baton Rouge center, the tech firm will meet with Louisiana Economic Development in the coming days to determine how it will reimburse Louisiana $1.4 million for falling short on the average number of workers it employed in the most recent contract year.
Because the average number of IBM employees over that time frame totaled 656 workers—or 144 employees short of its requirement—the company must pay the state a one-time, $10,000-per-job penalty for the shortfall.
Specific details of the reimbursement process have yet to be ironed out between the two parties as of this morning. But it’s likely the payback will come in the form of reduced financial incentives. The amended cooperative endeavor agreement, negotiated by the Edwards administration two years ago, states IBM will have to forfeit or receive reduced amounts of any remaining dollars from the LED-provided, performance-based Qualified Contract Labor Annual Grant.
In a prepared statement, LED says IBM is “displaying an upward hiring trend that is very encouraging,” though the economic development organization didn’t know this morning how many more employees the company had hired since its June 30 deadline. A graphic provided by IBM on Wednesday indicates it’s been roughly tens of people.
“IBM has made significant hiring progress in 2019 and is on the right trajectory,” LED says in the statement, touting the company’s list of clients, hundreds of Louisiana college graduate employees and technology.
When IBM failed to meet its hiring goal in 2017, the state could have penalized IBM by clawing back $1.5 million in state funds. Instead, the Edwards administration revised its agreement to keep IBM in Baton Rouge longer so the company could satisfy its promise. Though Gov. John Bel Edwards upped the performance penalty to 1.5 times its original amount, the move resulted in IBM paying back $100,000 less than it could have—a small sacrifice, his office says, that will pay off in the long-term.
“When deals like this are renegotiated, our main focus is always on making sure the jobs come and the opportunity exists for the state,” says Christina Stephens, a spokesperson for the governor’s office. “We always hope to get the full benefit of every deal.”
Overall, IBM employees received more than $30 million in total payroll within the past fiscal year, according to documents provided by LED, some $4 million more than the year previous.
The renegotiated two-year extension of the CEA keeps IBM in the state through at least 2027.
